Sharing TBC Bank experience on Credit Risk under ICAAP
Agenda
1
Overview
Credit Risk Governance
Credit Risk Management
Credit Risk Stress test
Way Forward
2
TBC Bank at a Glance
Key Facts About TBC Bank
TBC Financial Highlights and Ratios (30 September 2013)

No 1 in Retail Deposits – 34% of market share as at 30 September 2013;

A leading bank in the country with 27% and 25% market share of total
customer loans and total assets respectively as at 30 September 2013;

Number of customers: over 900k; Number of employees: c. 4,000;

Entered microfinance segment in May 2011 through acquiring Bank Constanta

Presence in Azerbaijan-subsidiary TBC Kredit - non-banking credit organization
USD million
Total assets
4,015
2,412
Net loans
2,618
1,472
Customer deposits
2,614
1,570
689
414
Stockholders’ equity
Financial Ratios
Branches
> TBC / TBC&Constanta
59 / 109
GEL million
ATMs
> TBC / TBC&Constanta
251 / 297
>
POS Terminals
3,295
ROaE (annualized)
18%
Cost to income
52%
Tier 1 CAR (BIS)
23%
Note: Exchange Rate Used: USD/GEL 1. 6644 as at 30 September 2013
Loan Portfolio Composition by Business Segments – 30 Sep 2013
BB-/Stable (FC Long Term IDR)
B1/Stable (Bank Deposits – Fgn Curr)
B (FC Short Term IDR)
Ba3 (Bank Deposits – Dom Curr)
Affirmed on 14 June 2013
Affirmed on 1 November 2012
Shareholder Structure
Source: Market Shares are based on National Bank of Georgia and include Bank Constanta.
Note: Number of accounts and number of employees include Bank Constanta
3
Two Founder Shareholders
26.70%
European Bank for Reconstruction and Development (EBRD)
19.80%
International Financial Corporation (IFC)
19.80%
Deutsche Investitions-und Entwicklungsgesellschaft (DEG)
11.31%
JP Morgan
4.96%
Ashmore
4.20%
Netherlands Development Finance Company (FMO)
5.26%
Management and others
7.97%
What is ICAAP
>
Basel II/III Overview
Regulatory Capital requirements of the bank will be defined in Accordance with Basel 2/3 requirements
Components of Basel 2/3
Pillar 1
Pillar 2
Pillar 3
Capital charge is
calculated based on NBG
regulation.
Banks Estimate its
capital requirements.
Use stress tests to
double check its
solvency.
NBG approval is needed.
Banks need to disclose
its capital calculations to
interested parties.
 Basel II and III are recommendations on banking regulations published by the Basel Committee on Banking Supervision
 National regulators decide to adhere to Basel committee regulations and set the requirements and timeline to the banks.
 The banks were required to be compliant with Pillar 1 requirements by June 2014 and submit first ICAAP by September 2014
4
TBC Experience in Implementation
Timeline
>
Feb 2012
ICAAP
Mar
External
consultant
selection
Apr
High Level
Gap analysis.
Credit review
May
Jun
Jul
Aug
Detailed Gap
Analysis
>
ICAAP implementation included:

Major improvements in risk management including
credit, operational, market and other risk management

Significant changes in corporate governance both on
the Supervisory and Management board level

Development of adequate framework

Integration of the processes into day to day management
Jan 2013
Main Benefits
 Better understanding and management of the
risk that banks face
 Enhanced corporate governance
Main Challenges
Availability of high quality data
Dec
 Better capital management through better
capital allocation practice
 25+ people from the banks side and two outsourcing
companies including Ernst & Young were involved in the
project

Nov
 Capital assessment and planning in accordance
with the risk profile
In total:
>
Oct
Implementation and Capital Calculation
Summary
>
Sep
 Enhanced transparency in capital calculation
and risk management resulting in enhanced
trust from regulators and investors
5
Feb
Credit Risk Breakdown
In million GEL
Data as of Dec 2013
Risk Weighted Exposures
1
Pillar 1
Pillar 2
Credit Risk
1.1 Credit Risk
3,380
3,380
1.2 FX Induced Credit Risk
1,272
437
1.3 Concentration Risk
-
455
2
Market Risk
4
4
3
Operational Risk
344
81
4
Strategic risk
-
67
5
Reputational risk
-
67
6
Interest rate risk
-
127
7
Total Risk Weighted Exposures
5,000
4,619


Compared to Pillar 1 Pillar 2 contains number of additional risks
Credit risk remains significant part of both Pillar 1 and Pillar 2 Risk Weighted Assets
6
92%
Agenda
Credit Risk Under ICAAP
2
Credit Risk Governance
Credit Risk Management
Credit Risk Stress test
Way Forward
7
Introduction to the Risk Management Function
TBC considers its risk management function to be fundamental to its business
Principles of Risk Management
>
Sustainability
Materiality
Proportionality
Risk acceptance/
risk hedging
Risk Management Process
>
 TBC conducts its business with a view towards
long-term sustainability
 TBC pursues a strategy that excludes any
involvement in transactions that could pose an
unacceptable risk for TBC’s activities, development
and reputation
Risk
identification
 The materiality of each risk to which TBC is exposed
across the corresponding asset classes is mainly
determined based on size of exposure, the current
nature of processes and related controls
Risk
assessment
 The more material a risk exposure is, the more
efforts and resources are devoted to its analysis
and more sophisticated approaches and complex
methods are applied to its measurement
Control
 TBC either accepts exposure to a risk or hedges
against it, depending on the type of risk
 TBC’s accepts risk exposure according to the
predefined risk appetite limits set by the
Supervisory Board and Management Board
Reporting
8
Identification of the full range of business
level risks TBC faces
Assessment of all identified risks based on the
likelihood of occurrence and significance of their
impact and creation of risk maps
Establishment of key control processes
and practices, including limit structures and
reporting requirements, and a formalised risk
monitoring process to control adherence to
predefined targets and risk limits
Establishment of effective management
information system in order to ensure a timely
flow of information to the corresponding risk
units
Risk Management Structure: Overview
TBC conducts its risk management activities within the framework of its unified risk management system
Supervisory Board
Risk ethics and
compliance committee
Corporate Governance
committee
Credit committee
Operational risk
committee
Loan approval
committee
Deputy CEO,
CFO
Financial risks
Treasury
Management Board
ALCO
CEO
Remuneration
Committee
Problems Loans
Committee
Risk management
Problem loans
Corporate
Credit risk
Business
SME
Strategic risk
Retail
Retail
Legal department
Repossessed assets
Operational risk
9
Internal audit
Compliance
department
Deputy CEO,
CRO
Underwriting
Audit committee
Information security
Internal control
Reputational risk
AML
Compliance
Risk Management Structure: Principal Bodies
1
Objective
Supervisory board
2
Principal Bodies
Risk, ethics and compliance
committee
3
Management Board
4
Responsibilities
Credit committee
5
Problem loans committee
6
Underwriting
Functions
Overall
risk
management
 TBC’s
Data
Quality
goal
isofeither
to
or
errors
and
Support
Monitor
Ensures
Ensure
Is
involved
the
the
TBC's
in
quality
maintenance
Supervisory
the
portfolio
applications
thedirection
of
Board
credit
of
problem
areduce
approval
balanced
in
portfolio
process
loan
isthrough
insupervisory
portfolio
correspondence
as members
all
phases
and
the
ofofwith
Transform
the
strategic
setassets
by avoid
the
board
and
redundancies,
as
well
as
set
up
corrective
and
preventive
controls
to
its
collection
correspondence
the
corresponding
work
TBC’s
with
risk
and
appetite
loan
of
supervision
actual
approval
risks
committees.
of
to
risk
the
management
predefined
limits
institute an effective hierarchy for its implementation
achieve and maintain appropriate to business purposes data quality
standards
Commit
TBCexistence
to
the highest
standards
of ethicalwith
behavior
 Ensure
lending
guidelines
are
legislation and
Ensure TBC’s
the
of
effective
riskconsistent
management
system
regulatory policies
 Oversee TBC’s compliance function
7
Risk Management
8
 Reviews
loan
presentations
onon
credit
exposures
prepared
by thevia
loan
Advise
the
Supervisory
Board
high-level
riskassessment
related
matters,
Approve
TBC’s
overall
strategy
and
makes
on:
risk
management
strategy
Is responsible
for
the decisions
timely
identification
and
of credit
 Considers
Define
strategic
principles
and
critical
processes
of
data
management
andTBC’s
creditrisk
analysts
to ensure
that
 officers
overseeing
Review
quality
of strategy
the TBC’s
and
loan
management
portfolio
of riskrisks
within
risks andthe
outlining
mitigation
actions
regarding those
thatTBC,
(i) Manage
planning
of
data
control
theproblem
analysis
is Risk
complete;
 the
Approve
TBC’s
risk
strategy
also
reviewing
Maps plan;
(i)
asset
recovery
be reduced
 should
Define
risk
tolerance/appetite
(ii)
comprehensive
information
islevels
gathered to assess the borrower's risk
(ii) repossession or sale of collateral;
Approve
risk
tolerance/appetite
levels quality
(iii)
Define
critical
data
as well
requirement
collection
and
recovery
ofas
allminimum
written-off
loans;
 profile;
Approve
credit
facilities
to
the
borrowers
in
case
themanagement
aggregated
Review
and
recommend
Supervisory
Board
on
risk
(iii)
Discuss
industry
trends
Develops
adequate
tools
and
models
for
effective
credit
risk
all
relevant
risks
are
identified
and
adequately
addressed
and
(iv)Monitor
data
quality
approval
associated
with5%
loan
recovery;
liability
of of
thecosts
borrower
exceeds
of the
Bank'sand
Basel capital
policies
(iv)
Approve
risk
management
policies
management,
such
asstructured.
application
the loanexecution
is properly
(v) Manage
of
data
control and behavioral scorecards and
restructuring
of
problem
loans
 rating
Reviewmodels
and recommend Supervisory Board credit portfolio forecasts
 Approve
credit
portfolio
forecasts
and
budgets
Develop
an
ethical
culture
within
TBC.
Periodically
and update
Oversees
the
monitoring
of
Corporate
SME
Loans
in
Ensure
timely
reaction
to process
the
developments
onand
thereview
market
and budgets
TBC’s Code
of Ethics
to discover
in
timelytesting
manner any
deterioration
in a exposures
 order
Develops
modelstrends
forastress
order
to budget
assess credit
Review portfolio
and actual in
figures
vs.
repayment
 borrower's
Review
portfolio
trendscapability
and
figures vs. budget
under various
scenarios
and actual
make corresponding
conclusions for
 capital
Monitor
the
compliance
of
TBC’s operations
adequacy
and provisioning
purposes. with the statutory
Approve
related
parties’
loans
legislation and internal policies
Data Quality Management
10
Agenda
Overview
Credit Risk Governance
3
Credit Risk Management
3.1 Counterparty Default Risk
3.2 Concentration Risk
3.3 Currency Induced Credit Risk
Credit Risk Stress test
Way Forward
11
Credit Risk Management
As a result of risk identification and assessment process, the following types of credit risks are identified:
Risk of negative consequences associated
with defaults or non-fulfillment of
concluded contracts in credit risk bearing
operations due to a deterioration in the
counterparty’s credit quality
Risk resulting from the use of credit risk
mitigation techniques
A
Counterparty
Default Risk
Residual Risk
D
Credit Risk
Types
B
Currency Induced
Credit Risk
Risks due to presence of foreign currency
denominated loans in the portfolio
Concentration Risk
Risk of deterioration of portfolio quality
due to large exposures to small number of
borrowers, or individual industries
C
12
Credit Risk Management Framework
Key principles
Policies, process
and procedures
A1
Credit approval
A2
Supervision
A3
Credit
collection
A4
Portfolio
management
A5
Provisioning



Establishing an appropriate credit risk environment
Operating under a sound credit-granting process
Maintaining efficient processes for credit risk measurement, control and monitoring

The Supervisory Board approves and annually reviews TBC’s Risk Management Strategy and key risk polices
₋ the Risk Management Strategy outlines key principles for credit risk management, sets risk tolerance levels and a detailed plan
The Management Board oversees:
₋ the development of the relevant policies and procedures to identify, measure, monitor and control key risks
₋ the implementation of an effective organisational structure to execute and implement these policies

 Comprehensive assessment of a borrower's risk profile
 Credit approval and covenant Setting
 Automated processing based on scoring models




Monitoring timeliness of debt repayments
Review of business borrowers financial conditions
Reassessment of collaterals value
Behavioural ratings update
 Identification and monitoring of doubtful loans on watch
 Formulation of collection strategies
 Cooperation with the external collection agencies




Review/analysis of the overall portfolio dynamics
Management of loan exposure / concentration levels
Performance of portfolio stress tests (currency induced credit risk assessment, enterprise wide stress test)
Development of scoring and rating models
 NBG provisioning
 IFRS provisioning
13
A1
A. Corporate and SME Loans - Credit Approval Process
Retail
SME
Project analysis and review
Origination


Corporate loans



SME loans
Corporate
Applications originate at
TBC’s head office
Credit analyst together
with corporate banker
analyses loans and
company’s financials,
structures credit facility
and assigns a rating
Collateral is appraised by
an independent internal or
external appraisers’ group

Applications originate at
TBC’s branches
Loan officer analyses loan
purpose and the company’s
financials and assigns a
rating. Collateral is
appraised by internal
appraisers’ group

Decision
Corporate credit risk
manager (loans> GEL 2mn)
ensures complete analysis
from credit analyst,
identification of all risks
and proper structure of
loans

Loan is reviewed by
the branch’s internal
committee to ensure
completeness of the loan
application documents and
the loan officer's analysis

14
Micro



Loan submitted to the centralized Corporate loan
approval committee
In the event that all members of the relevant Loan
approval Committee agree unanimously, the loan is
approved
A corporate loan to a "large borrower" (a borrower
with exposure to more than 5% of TBC Bank's Basel
capital) would require the review and approval of the
Risk, Ethics and Compliance Committee
The loan is submitted to the centralized SME loan
approval committee
In the event that all members of the relevant Loan
approval Committee agree unanimously, the loan is
approved
A1
A. Corporate Customers Desired Ratios
Ratios are analyzed in comparison with peer and industry data. Both historical and projected ratios are considered for
analysis:
Ratio
Definition
Benchmark
Debt/EBITDA
Measures operating leverage, used to determine debt capacity of the company;
<3
Debt/Equity
Views company’s debt in relation to its capital;
<2-3
EBIT/Interest
Measures ability to repay interest expenses related to the loans;
>2
Current Ratio
Measures liquidity position of the company;
>1
Debt Service Cover
Ratio
Shows company’s ability to repay loans from its operating revenues.
> 1.2 - 1.3
From 1H 2014 this will change and TBC Bank will introduce industry specific ratios
Current estimate examples are:
Trading Operations: Debt/Equity < 4,
Telecommunications: Debt/EBITDA < 4;
Project Finance (Power Generation): Debt Service Cover Ratio (DSCR) > 1.50
In addition, TBC Bank may utilize other ratios – mostly industry-specific ones, that are used for the analysis of specific company or industry.
Please also note that these ratios are not mandatory, they rather shape desired limits of respective financial measurements. Out of these ratios, Debt/EBITDA, DSCR and Debt/Equity are more important
15
A1
A. Corporate and SME Loans – Rating model
Rating models
>




Expert model was developed together with Ernst &Young during Basel II/III implementation project
At present the model is applied for portfolio quality monitoring.
Given the expert origin, the model is carefully monitored for validity
Once the model is validated, it will be used as a supporting tool in credit approval process, for limit setting and
pricing purposes, for provisioning purposes
Final grade consists of :
Industry score (20%)
Qualitative Borrower score (15%)
Quantitative Borrower score (65%)
Industry assessment
Qualitative criteria







 Company's position in the
industry
 Organizational and managerial
activity
 Company’s governance
 Finance, accounting and control
 Business reputation
 Relationship with the Bank
Financial Stability
Economic Volatility
Demand Trend
Barriers to Entry
Sector Competition
Access to Inputs
Operational
Gearing and
Capital Intensive
16
Quantitative criteria









Evaluation of solvency
Cover debt service through gross profit
Effectiveness of operations
Assessment of profitability
Earnings volatility
Dividends / Net income
Coefficient of autonomy
Valuating of client’s liquidity
Rates of turnover
A2
A. Retail Loans - Credit Approval Process
Retail
SME
Origination


Mortgage Loans,
Consumer Loans, Car
Loans


POS loans and Credit
Cards
Corporate
Project analysis and review
Applications originate in
branches
Loan officer gathers and
reviews preliminary
information and determines
the type of credit facility that
best meets the applicant's
needs

POS loan are originated by
merchants acting as TBC's
agents or TBC staff located at
the merchant
Credit Cards originate in
branches




Micro
Decision
Checks are made in internal
and external databases (Credit
Bureau, Public Registry, Civil
Registry)
Thorough analysis of credit
application is conducted
Collateral is appraised by
internal appraiser’s group

Loan submitted to the centralized Retail loan approval
committee
POS loans and Credit Cards
applications are assessed
using application scoring
model and credit bureau
ratings
Scoring is applied once the
borrower meets the minimum
requirements for the product,
such as age, minimum income,
and similar criteria

Automated Approval and Rejection zones are defined
individually for products, based on performance of loans
within these segments
17
A2
A. Retail Loans - Credit Approval Process

Decision based on
scorecards


TBC Bank has started assessing POS loans and Credit Cards applications using Scoring Model from 2008
and 2012 respectively
Automated Approval and Rejection zones are defined individually for products, based on performance
of loans within these segments
Applications that fall in manual zone are assessed by Centralized operations management department.
Phone calls are undertaken to the work place and family members of the borrower in order to cross
check the data provided by the borrower in the application
Credit Bureau Rating
Very low risk
Low risk
Medium risk
High risk
Very high risk
Application Scorecard
Very high risk
Automated Rejection
High risk
Manual
Medium risk
Low risk
Manual
Automated Approval
Very low risk
18
A2
A. Retail Loans - Ratios
Maximum portion of revenue, which can be applied to cover the loan
PTI
Net Revenue Amount
(In case of dividends median of Revenues for the last twelve months)
US Dollars
<
<
<
<
>=
600
1 000
1 500
3 000
3 000
Revenue Share
Standard
Allowed
25%
30%
35%
40%
50%
-40%
45%
50%
60%
Loan Amount / Collateral Market Value (LTV) differs according to Collateral Types:
LTV
Debt Service
Ratio
Real Estate
Car / Land
70%
60%
(Borrower’s Family Total Revenue – Total Costs) / Monthly Installment >= 1.3
19
A2
A. Retail Loans – Rating Model
Rating models
>
 Behavioural rating model for retail loans was developed by Experian in 2012 based on the Bank’s five years statistical data
 In compliance with Basel regulation three models were developed for:
(1) loans secured by real estate, (2) credit limits, and (3) other retail loans
 For each segment the model is further differentiated according to the number of months on books of the loan: less than 6
months on books and more than 6 months on
 Following variables are included in the model (with approximate weights) books
Length of credit history
 Length of credit history
Payment behaviour
 Information about payment overdues:
current overdue days, maximum length of
overdues in the last 12 months, etc
Macroeconomic variables
 Refinance rate, GDP, etc
Utilisation of facilities
 Frequency of credit limit usage,
deposits, current balance of the
loan amount, etc
Data from application
 Gender, work experience, type
of the client, etc
20
Agenda
Overview
Credit Risk Governance
3
Credit Risk Management
3.1 Counterparty Default Risk
3.2 Concentration Risk
3.3 Currency Induced Credit Risk
Credit Risk Stress test
Way Forward
21
B
A.
Concentration Risk
Concentration management is a significant function of credit risk management
Already Implemented
The system is already established to identify, measure, monitor, and control credit risk concentrations
TBC limits the level of credit risk it undertakes by placing limits on concentrations of:
(i) single borrowers and groups of related borrowers;
(ii) single industry and groups of "higher-risk" industries
Under Development Process
New methodology is under development for concentration risk management
Credit concentration risk measurement process will be improved based on the Central Bank of Spain’s guidelines
Reasons for selecting Spanish regulation:
 Spain was strongly effected by the global financial crisis 2007-2012, the following global recession 2008-2012, and by the
European sovereign debt crisis
 The Spanish credit market is heavily dependent on mortgages in particular and on real estate in general
 The Spanish simplified option is considered good regulatory practice and implemented in a similar form by several Eastern
European regulators (i.e. the Slovenian and the Serbian regulator)
 The Spanish simplified option is consistent with the Basel 2 standardized approach to credit risk measurement and results into
concentration risk numbers that are easily comparable across the banking industry
Two Types of Concentrations are managed: Single name and Sectoral concentration
Concentration indexes will be calculated using Herfindahl-Hirshman Index (HHI)
22
B
A.
Concentration Risk
Individual Concentration
Index
Multiplier
0.10%
0%
0.15%
0.30%
0.60%
2%
7%
15%
1.20%
27%
2.40%
60%
4.80%
129%
9.60%
248%
42.80%
1071%
Sectoral Concentration Index
Multiplier
Number of industries assessed: All industries
0 < ICS < 12
0%
The sectoral concentration index (HHIS) of the credit portfolio is
calculated as following:
12 < ICS < 15
15 < ICS < 20
20 < ICS < 25
2%
4%
6%
25 < ICS < 100
8%
Single Name Concentration
>
Number of Borrowers assessed: 1,000
Grouping method: Largest Borrowers or Group of Borrowers
Individual Concentration Index
x is the total direct exposure to the groups under the top 1,000
y is the direct exposure to the groups under the entire portfolio
The surcharge should be applied to the capital requirements for credit
risk relating to the borrowers included in the calculation of the
individual concentration index (Σy).
Sectoral Concentration
>
Σxi2 / (Σxi) 2 * 100
x is the value of risk exposure to each economic sector
The surcharge should be applied only to the capital requirements for
credit risk relating to the exposures included in the calculation of the
sectoral concentration index
23
B
A.
>
Concentration Risk
Limits
In addition to HHI suggested by Central Bank of Spain TBC Bank will limit single name concentration
risk, using top 1, 5, 10 and 20 borrowers exposures ratios
Actual limits vs maximum limits will be communicated to the Management Board on a monthly basis
and to RECC on a quarterly basis
>
Stress Tests
In addition the Bank will undertake concentration risk stress tests on a quarterly basis
Under stress testing the Bank will assess what would be the loss of regulatory capital if the top 1, 3
and 5 borrowers default in the same time
Results of stress test will be applied for credit risks monitoring purposes and will be communicated to
the Management Board on a quarterly basis
24
Agenda
Overview
Credit Risk Governance
3
Credit Risk Management
3.1 Counterparty Default Risk
3.2 Concentration Risk
3.3 Currency Induced Credit Risk
Credit Risk Stress test
Way Forward
25
C Foreign Currency Induced Credit Risk
A.
Details
Currency induced credit
risk
Stress Test Details
The results obtained by
stress test

Given a considerable share of foreign currency denominated portfolio, Currency Induced Credit Risk is very significant.

TBC Bank estimates CICR using a specially developed stress test.

Stress test is undertaken on a yearly basis

Potential losses are estimated for a foreign currency-denominated credit portfolio compared to the scenario if these
loans were disbursed in GEL. Losses are assessed based on changes in borrowers ratings in case of currency
devaluation.

In case of business loans individual borrowers are assessed and results are extrapolated for corresponding industries,
whereas for retail loans portfolio losses are estimated for all foreign currency denominated loans.

Results of currency induced credit risks are considered when calculating economic capital and assessing capital
adequacy.
26
Agenda
Overview
Credit Risk Governance
Credit Risk Management
4
Credit Risk Stress test
Way Forward
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Stress Tests
Enterprise Wide Stress Testing
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Stress-testing is performed to estimate potential losses in case of highly improbable but severe macroeconomic conditions
and ensure sufficient capital is in place to withstand the stress
Key actions

Stress-testing is performed quarterly or more frequently in case of a significant change in the market conditions
 Following macroeconomic parameters are stressed:
•
•
•
•
•
GDP Growth
-15%
CPI Change
-10%
Unemployment
17%
Exchange Rate
18%
Real Estate Change 39%
 Stress scenarios are defined based on (i) most severe GDP decline in Georgia and its peer countries during the last 8 years and (ii) stress
scenario provided by NBG
 Yearly bases dependences and correlations are assessed between these macroeconomic variables and Bank’s losses.

Based on identified dependencies, potential credit losses are estimated for individual products and industries in case of stress scenario
 The results of EWST are expressed as the amount of capital needed in order to withstand the full potential losses resulting from the specified
stress events.
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Agenda
Overview
Credit Risk Governance
Credit Risk Management
Credit Risk Stress test
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Way Forward
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Way Forward (Credit Risk Focus Under ICAAP)
I Phase-Accomplished
II Phase

Developed Risk Strategy that is in line
with Bank’s business strategy

Further improving application
scorecard for retail loans

Corporate customer rating model was
introduced. Existing rating model was
updated in accordance with Basel 2
requirements

Enhance overdue loans management
process for retail loans

Implement Internal Rating Based
approach for retail loans

Retail client rating model was
introduced

Further improve business loans
assessment model

Currency Induced Credit Risk (CICR)
assessment was performed and
respective model was developed

Improved Concentration risk
management

Enterprise Wide stress test has been
developed and performed

Enhanced corporate governance and
credit risk management bodies

Introduced risk based audit planning
compliant with Basel requirements

Introduced Economic capital
framework that is the first step to risk
adjusted performance appraisal
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Results
 More mature Credit Risk management
 Better assessment of capital
 Direct link from borrowers’ risk profile
to capital charge